Bitcoin fell alongside the US equity futures and stocks as Fed Reserve highlighted potential policy tightening.
Bitcoin dropped towards $33K from its record high near $69K as the broad market sees growing negative sentiment. That comes as the United States plans to adjust its policies, citing inflation concerns.
The downtrends hit the entire cryptocurrency ecosystem as the global crypto industry erased over $1 trillion of value. For now, investors remain worried as conditions alarm historical reactions. In 2018, similar situations had Bitcoin plunging by over 80% towards the lows of $3,100. Moreover, it took BTC more than one year to hit another peak (2020 December). Here is why BTC is declining.
The US Federal Reserve signaled a new approach, raising interest rates and reducing bond holdings, planning to end its economic support (amid pandemic), concentrating on fighting the highest inflation in decades. Moreover, the bank will way on the probability of the United States issuing a dollar-tied digital coin, the Central Bank Digital Currency (CBDC).
Officials told Bloomberg the Biden administration prepared to release the first government strategy for virtual assets in the coming month. Meanwhile, task federal agencies assets opportunities and risks related to cryptocurrencies.
The latest draft highlights crypto’s national, regulatory, economic, and security challenges. The board would gather reports from different agencies in the 2022 second half. Meanwhile, the impending threat of increased regulatory move weighs on the crypto market.
Correlation with Equities
Crypto saw its equities’ correlation strengthening over the recent weeks as market players reacted to potential monetary policy tightening by the US by dumping costly tech stocks and cryptocurrencies. BTC’s movements in tandem with NASDAQ 100 and S &P 500 attained an ATH this month, maintaining assurance that one of the most volatile assets may be more foreseeable in the future.
The United States stock market endured losses this month due to unease as the Fed plans to adjust its monetary policy. Such developments had the crypto spectrum tumbling.
Crypto fans should remain patient with the market to establish dependable directions. Meanwhile, pundits believe asset prices will drop before rising. What are your views? Comment below.